Question

Ms. Daneen is the management accountant of Delight Confectionaries which is a company manufacturing chocolates and candies in many flavours since 2017. The company has marketing, finance, production, customer services and human resources department. The management of the company has decided to introduce budgetary control system in the company from the year 2019.

ANSWER THE FOLLOWING QUESTIONS:

A. List, explain and justify the FOUR important budgets which Ms. Daneen will be preparing for the confectionaries company with suitable examples.

Note: Include the meaning of the budget, the reason for preparing the budget, the period for which the budgets are prepared, along with the justification of why the budget is important.

B. Ms. Daneen wants to prepare rolling budget at the end of every month from the year January 2019. Explain the preparation of rolling budget for Delight Confectionaries by mentioning the preparation from January 2019, number of times budgets will be prepared, period (months) included every time in the budgets.

Answer 1

A budget is a formal statement of estimated income and expenses based on future plans and objectives. In other words, a budget is a document that management makes to estimate the revenues and expenses for an upcoming period based on their goals for the business.

reason for preparing the budget

A budget helps to gain control of the finances

Budgeting helps to achieve goals

A good budget keeps honest . It allows to stay accountable to the goals.

Budgeting helps improve habits. By measuring how spend the money, co. will know for sure whether , headed for trouble, and can take the steps necessary to improve the habits.

Budgeting helps you avoid debt and improve credit

the period for which the budgets are prepared, -a budget period depends upon nature and type of business. Some companies are preparing a budget for more than one year and some companies limit the period to one year.every weekend or month , 6 month , one year , and more but it should not too long

Ms. Daneen manufacturing chocolates and candies .important budgets which Ms. Daneen will be preparing for the confectionaries company

Production budget -The production budget is very useful in determining the cost of production , from the help of this budget daneen know the production cost of the chocolates and candies , and control over spended cost . so the production cost is less and profit is more   

Cash flow budget -Cash flow budget is useful for the organization to manage its cash .

Sales Budget -Sales budget gives some expected sales revenue and expenses, sales of chocolates and candies

Financial budget - he financial budget helps to paint the overall picture of the financial health of the company

Operating Budget -Operating budget factors such as production, labour cost, etc. to provide a clear picture for the company.

B - Rolling simply means continuous. Rolling budget continuously updated by adding further accounting period when the earlier accounting period is completed

The rolling budget has a dynamic approach. Instead of a static budget of 12 months, it rolls forward by a quarter or a month.

Rolling budget is the extension of existing budget. Hence, it requires more efforts to update and implement compared to static budget. It requires time and efforts in preparation.

Once the January 2017 month passes, the original budget extends up to January 2018. Hence, now the budget is again 12 months. Let us call it as RB1.

Likewise, once the February 2017 passes, the RB1 extends up to February 2018. Accordingly, the budgeted period shall remain 12 months only.

The cycle keeps on moving. Hence, it is a continuing process.

as per my opinion in the given case  Delight Confectionaries can make the rolling budget but its very time consuming apart from that it take mangemant afforts .